| In the five and a half years since the New York State Department of Financial Services implemented its Cybersecurity Requirements For Financial Services Companies regulation, I had yet to hear of an insurance producer being penalized for violations. Until this week.
As is my habit, I checked the department's website first thing Monday morning and found a news release they had issued last Friday, June 24. The release announced a $5 million penalty against an insurance producer for violations of the regulation.
I should mention that this wasn't any ordinary insurance producer. It was Carnival Cruise Line, the high-profile provider of ocean cruises whose annual revenue shrank to $3.5 billion in the 12 months ending in February 2022. Apparently, Carnival had New York producer licenses to sell life insurance, accident and health insurance, and variable life/variable annuities insurance. I say "had" because the department's news release reported that the company had surrendered its licenses.
According to the news release, Carnival suffered four cybersecurity events 2019 and 2021, including two ransomware attacks. "These Cybersecurity Events involved the unauthorized access of the companies’ information systems, leading to the exposure of customers’ sensitive, personal data," the statement said.
DFS found that the company had violated five sections of the regulation:
- 500.12, which required them to implement multi-factor authentication
- 500.2, which required them to include in their cybersecurity program a plan to meet reporting obligations to DFS
- 500.17(a), which required them to report a significant cybersecurity event to DFS within 72 hours of determining that it had occurred (the first event was not reported within that timeframe)
- 500.14, which required them to implement policies and procedures designed to detect unauthorized access or use of non-public information
- 500.17(b), which required them to annually submit an accurate certification of compliance with the regulation The department determined that (the certifications filed for calendar years 2018 through 2018 were "improper" because of the missing safeguards)
Insurance agencies and brokerages that qualify for the regulation's limited exemption are exempt from the multi-factor authentication and system monitoring requirements. However, the event reporting and certification of compliance requirements apply to all individual and entities who have New York insurance licenses. Any agency that is not complying with those requirements could also face DFS penalties, though likely not to the tune of $5 million.
The takeaway: DFS is enforcing this regulation. To date, the enforcement actions they've publicized have been against large entities - lenders, insurance carriers, and now a multi-billion dollar travel business. New York licensed agents and brokers should not assume that big targets are the only targets. All "covered entities" (those with New York insurance or financial services licenses or banking charters) are expected to comply with requirements that apply to them. We encourage you to take the obligations seriously.
For more information on how your agency or brokerage can comply with the regulation:
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Ketanji Brown Jackson Photo by
Rose Lincoln, Harvard University. Used under a
Creative Commons Attribution-ShareAlike 4.0 International license.
Ketanji Brown Jackson today took the oaths of office to become the newest associate justice of the U.S. Supreme Court. She succeeds Associate Justice Stephen Breyer, for whom she once served as a clerk.
I always find it interesting, when a Supreme Court justice
enters or exits (Scalia,
Ginsburg) the stage, to investigate how they have ruled on cases that might be of concern to insurance carriers, agents or brokers. Presidents tend to pluck jurists from the federal courts when they nominate Supreme Court justices. Insurance, however, is regulated primarily at the state government level. For that reason, I don't often find a lot when looking for insurance cases.
Associate Justice Jackson served on the U.S. District Court for the District of Columbia from 2013 until 2021, when President Biden elevated her to the U.S. Court of Appeals for the D.C. Circuit with the Senate's consent in 2021. In searching her record for insurance cases, I found several involving Medicare and Medicaid reimbursement disputes involving health care providers, and a few arguments over Social Security disability and federal employee benefits. However, I did find two opinions from her years on the circuit court that are relevant to the property-casualty insurance industry. In Sickle v. Torres Advanced Enterprise Solutions, delivered on Christmas Eve 2013, two former subcontractors of a defense contractor claimed that the contractor illegally retaliated against them because one of them sought workers' compensation benefits under the Defense Base Act for an on-the-job back injury. The contractor argued that procedures under federal law did not permit their lawsuit, as the Defense Base Act and the Longshore and Harbor Workers' Compensation Act were their exclusive remedies. Jackson ruled in the contractor's favor:
“The well-established doctrine of exhaustion of administrative remedies provides 'that no one is entitled to judicial relief for a supposed or threatened injury until the prescribed administrative remedy has been exhausted.' …
There is no doubt that the (Department of Labor) has established a comprehensive administrative procedure for DBA/LHWCA discrimination and retaliation claims that enables the agency to exercise its expertise and discretion in resolving those claims, while also allowing for eventual federal court review. … If Plaintiffs had taken advantage of the process that the applicable regulations afford, a DOL district director would have been required to investigate their retaliation complaints and to make a recommendation as to the appropriate disposition, including employer penalties and employee remedies. … This Court sees no reason to allow Plaintiffs to sidestep this process, particularly where the regulations broadly empower the DOL to require reinstatement and back pay and to 'make such restitution as is indicated by the circumstances of the case,' … which is in large part what Plaintiffs seek in this action. …
The bottom line is that, as federal courts across the country have found, the DBA expressly and impliedly preempts other remedies state law affords to similarly-situated plaintiffs."
In
Blackstone v. Brink the following year, Jackson was asked to decide whether a settlement agreement allegedly accepted by the estate of an individual who was killed by multiple cars while crossing a street in northwest Washington, D.C. was enforceable. State Farm, the insurer for one of the drivers, offered policy limits in settlement in exchange for the estate waiving its rights to sue. The dispute was over whether the estate's attorney actually accepted State Farm's proposed agreement. She found that the documentation of the conversations between the attorney and the State Farm representative were evidence that an oral contract existed, and therefore the settlement agreement was enforceable:
“… (T)his Court concludes that Defendant Brink has met his burden of demonstrating by clear and convincing evidence that, on or about September 10, 2013, Plaintiffs' counsel and State Farm representative Oltchick orally agreed to the material terms of a settlement agreement and likewise intended to be bound by that arrangement. Accordingly, as set forth in the separate order accompanying this opinion, Defendant Brink's motion to enforce the settlement agreement between the parties is GRANTED."
In Justice Jackson's limited insurance jurisprudence, it was insurance carriers two, claimants zero. A property-casualty insurance dispute may never reach the high court during her tenure. If one does, these two opinions give faint clues as to how she might rule.
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| Legal Clashes Await U.S. Companies Covering Workers' Abortion Costs
A growing number of large U.S. companies have said they will cover travel costs for employees who must leave their home states to get abortions, but these new policies could expose businesses to lawsuits and even potential criminal liability, legal experts said. Adapting to Changing Policyholder Behaviors & Expectations There is a need to evolve data analytics alongside changing customer behaviors and expectations. How Cannabis Legalization in NY is Affecting Landlords One Year Later Landlords should first check with their insurers before renting to determine whether any loss arising from marijuana use by a tenant must be excluded. Cyber Pirates Prowling Ship Controls Threaten Another Big Shock There's an emerging threat to global trade: cyber piracy able to penetrate on-board technology that's replacing old ways of steering, propulsion, navigation and other key operations. AM Best Downgrades Members of NLC Insurance Companies Pool AM Best has downgraded the Financial Strength Rating to B++ (Good) from A- (Excellent) and the Long-Term Issuer Credit Ratings to “bbb+" (Good) from “a-" (Excellent) of the insurers that operate under an intercompany pooling agreement and are collectively referred to as NLC Insurance Companies Pool (NLC), headquartered in Norwich, Conn. Health Insurance Premiums Poised to Jump Next Year for 13M People Those with health insurance through the government's Health Insurance Marketplace can expect to pay more next year. Wall Street Banks Quietly Test Cyber Defenses at Treasury's Direction With global tensions rising over Ukraine, the US financial sector's cutthroat competitiveness is giving way to collaboration in the belief that a cyberattack against even a small group of minor banks – or a third-party service provider – could endanger everyone in a highly connected system. G-7 Weighs Russia Oil-Price Cap Via Insurance, Shipping Ban
The Group of Seven nations is discussing a price cap on Russian oil that would work by imposing restrictions on insurance and shipping. Why Insurance Apps Don't Replace Agents, but Make Them Look Better JD Power's latest survey showed that increasingly snazzier web and mobile app offerings don't offset high insurance rates when it comes to customer happiness. The Big 'I' and Insurance Business America Team up for Special Report Insurance Business America (IBA) has teamed up with the Big “I" to launch the Rising Stars Special Report 2022, which identifies and celebrates young insurance professionals who are committed to their insurance career with a clear passion for the industry and have gone the extra mile to distinguish themselves among their contemporaries.
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Independent Market Solutions (IMS) was established in 2007 with the goal of creating greater market access for member agents. In 2019, Big I New York made the investment to be a part of IMS and, since that time, we have grown market availability in New York to include 11 participating carriers that offer personal, commercial, and various specialty lines.
The purpose of IMS is to provide member agents access to quality insurance markets and alternatives that may be otherwise unavailable. IMS creates marketplace leverage through its negotiated contracts, which can be particularly helpful for smaller or rural agents.
Big I New York membership allows your agency to sign-up for the program and gain carrier appointments as an IMS sub-producer at no additional cost. Agencies are paid competitive commissions, enjoy 100 percent ownership of expirations, and can participate in earned contingencies. Additionally, several IMS markets feature the opportunity to “graduate" to a direct appointment once certain production goals are met – again, at no additional cost to your agency.
Ultimately, our mission is to add to the success and prosperity of independent agencies by providing viable market access through IMS. New York is a proud owner of IMS, along with our association colleagues in other states. To learn more about the carriers IMS could help connect you with, click here.
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| A new state law has made peer-to-peer car sharing programs, such as those offered by Turo, available in New York State. Last week, the state Department of Financial Services published several changes to insurance regulations to implement the law. Watch this two-minute video to learn what they mean to your clients and you.
Music by AudioCoffee from Pixabay
Download a PDF file of the slides
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| By Sue Keegan, Education Administrator
We are excited to announce that Big I New York has earned a Diamond Elite 2022 Excellence in Insurance Education award from IIABA!
The criteria for this award includes creation of new programs, ways to deliver education in our "new normal," innovation, and marketing.
We are honored to continue to deliver you award-winning education opportunities!
Love, your awesome education team, Jim, Sue, Tim, Lisa and Kim
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| Pandemic Takes Toll on Mental and Physical Wellbeing, Leading to More Online Insurance Purchases
A Swiss Re Institute survey of 11,000 consumers worldwide conducted two years into the COVID-19 pandemic found that the pandemic led to an increase in online insurance purchases as well as a greater willingness to share personal health data, particularly among the younger generation. State Farm Hit by Summary Judgement Reversal A court order which granted summary judgment to State Farm over a breach of policy case has been reversed.
Price of Homeowners Insurance Jumps 34% QuoteWizard® released their annual "State of Home Insurance" report and found that the average price of home insurance has increased by as much as 34% in some states since 2021. NY Botanical Garden can go Forward with COVID Business Interruption Suit A New York state appeals court is allowing the New York Botanical Garden to go forward with a business-interruption loss suit against an insurer that refused to pay for losses due to COVID-19 shutdowns. U.S. Commercial Auto Q1 Premiums Make Significant Jump Over 5 Years According to an S&P Global Market Intelligence analysis, direct premiums written for the liability business line by U.S. commercial auto insurers in the first quarter were significantly higher than in the same period in 2018. New York's High Court Rejects Trump Bid to Skip Testifying in AG's Civil Suit New York's highest court on Tuesday rejected former President Donald Trump's last-ditch effort to avoid testifying in the state attorney general's civil investigation into his business practices, clearing the way for his deposition next month. Lightning Caused $1.3 Billion in U.S. Homeowners Claim Payouts in 2021 According to the Insurance Information Institute (Triple I), more than $1 billion in lightning-caused U.S. homeowners insurance claims were paid out to 60,000-plus policyholders in 2021. Former NY Insurance Regulator Joins Lemonade Lemonade has hired New York's former top insurance regulator, Scott Fisher, to help lead its legal team. New York City and Miami Have Most Homes at Risk of Storm Surge Damage CoreLogic risk modeling data shows that nearly 7.8 million homes with more than $2.3 trillion in combined reconstruction cost value (RCV) are at risk of hurricane-related damages. Hardened U.S. Cyber Insurance Market Here to Stay
According to an AM Best report, a 16% increase in claims and only a modest reduction in the loss ratio despite significant rate increases highlights the segment's ongoing challenges.
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| By Julie Furst, Big I NY AVP of Marketing & Communications
Big I New York Chair of the Board Nick Masterpole with his family at his installation ceremony. Nick is part of a multigenerational agency and was sworn in by his father at the event.
There's something special about our industry that feels pretty unique - the number of multigenerational agencies. Just this morning, I was on a call with six agencies, and 3 of them were the third generation. I often hear agents reference 'my father' or 'my grandfather' and 'our family.' The independent agency channel is full of family businesses. And, I usually hear the story of how generations 2 and 3 were going to embark on a different path but found that the road led back to home in their agency.
Though being in a family business can be complicated at times, the nostalgia and respect for those who came before are clear. These agency forefathers often rose against opposition to hang their shingle and support their loved ones while fighting for agency appointments. They pounded the pavement at night and on weekends to build a book of business. They dreamed of having their children follow in their footsteps while having to try to flex to the new ideas the young ones brought when they came on board.
The nature of several generations of business means you've been around a while too. These families built a tradition of community support and engagement. They've helped similar agencies, even though they were competitors. They've endured ups and downs and have historical knowledge to pass along.
So, cheers to the fathers and grandfathers who have come before us in our channel, and those who will carry us forward. This is a great place for a family business.
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| Join us Sept. 14-18 in Niagara Falls, New York, for our 2022 Big "I" Fall Leadership Conference! You don't want to miss the opportunity to enhance your leadership skills and network with your peers. This year's program will include IIABA Board of Directors, Executive Committee, and other committee meetings. The Fall Leadership Conference will also offer additional program events, such as the Education Convocation, to be held Sept. 13-15, and the Young Agents Leadership Institute (YALI), to be held Sept. 16-17. Be sure to join us on Sept. 17 for the Installation of Officers luncheon and reception in honor of John Costello, chairman-elect, hosted by Big I New York. Collectively, these program events facilitate unique connections with industry leaders of today and tomorrow.
To reap the benefits of this annual event, register today. Guest rooms sell out fast, so don't delay in reserving your hotel accommodations. Remember to keep an eye on the State News e-newsletter in the coming months for up-to-date program details; check out the program schedule. Source
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| After a long final week, the regularly scheduled 2022 Legislative Session concluded, with the Senate finishing their work at 2:30 A.M. Friday June 3rd, and the Assembly finishing just before 8:20 A.M. on Saturday June 4th. During the entire 2022 Legislative Session, 1,007 bills passed both Houses, which is the most to have passed both Houses during a Legislative Session in the last 25 years.
We are pleased to report that we have scored several major wins this session, including most notable, the passage of our bill to eliminate mandatory auto photo inspections. Contact SHobson@BigINY with any questions.
Beneficial Bills Passed/Advanced: ✔ Repeal Auto Photo Inspection Mandate – Passed Senate and Assembly S.6028 (Breslin) and A.6877 (Zebrowski) In a historic victory, Big I NY's “Auto Insurance Consumer Relief Act", which makes auto photo inspections optional at the discretion of insurance carriers passed both houses of the legislature. The bill is our top legislative priority this year, and has finally cleared the legislature after being stalled for nearly a decade. The passage of this bill was the result of a concerted multi-year grassroots and lobbying campaign involving legislative meetings with agents and lawmakers, hundreds of phone calls and emails, 1,700 petition signatures by agents and their customers, and a statewide PR and media campaign. As a testament to the strength of our campaign and merits of our position, the bill passed both houses with overwhelming support. The bill must now be signed by Governor Hochul. We anticipate the bill will not be sent to her desk for several months, at which time she has ten days to act. If signed, photo inspections will become optional at carrier discretion beginning January 1, 2023.
✔ Streamline Excess Lines Affidavits – Passed Senate and Assembly S.8127 (Breslin) and A.9088 (Hunter) We celebrate another important win with the passage of a bill to reduce the information required to be reported when placing coverage in the excess markets. The bill would reduce the number of data elements that a broker is required to collect and report for each of three declining licensed insurers from seven to three. The insurer name, NAIC number and the reason the broker believed the licensed insurer would consider underwriting the risk would still be recorded in an affidavit. The bill must now be signed by Governor Hochul. We anticipate the bill will not be sent to her desk for several months, at which time she has ten days to act. ✔ Anti-Arson Application Repeal - Passed Assembly S.2627 (Sanders) and A.603 (D. Rosenthal) Big I NY supports legislation to repeal the anti-arson application in the last remaining jurisdiction, NYC. The bill passed the Assembly this year, but was not brought up for a vote in the Senate. Harmful Bills Defeated: ✔ Single Payer Healthcare – Died in Committee, Senate and Assembly S.5474 (Rivera) and A.6058 (Gottfried) This bill would abolish the state's private health insurance market in favor of a government run “single payer" program. The Assembly has passed the bill five times now, and there are currently 33 co-sponsors in the Senate; the exact number needed to pass it. Last year, Big I NY mobilized a group of members with experience in the health and benefits space to meet with Senators during “Single Payer Action Week." That momentum carried into 2022, and the bill ultimately the bill was never voted out of committee in either the Senate or Assembly. ✔ Lead Paint Exclusion Ban – Passed Assembly, Died in Senate Insurance Committee S.7039-A (Ryan) and A.7488-A (Rivera) Legislation to ban the use of lead paint exposure exclusions in residential habitational coverage passed the Assembly, but died in the Insurance Committee in the Senate. This bill would send shockwaves through the market, and could lead to a crisis of cost and availability. Big I NY and partners in the insurance industry advocated instead for a primary prevention approach as a more effective solution to the issue of lead paint poisoning. Harmful Bills Passed: ❌ Expansion of Wrongful Death Benefits – Passed Senate and Assembly S.74-A (Hoylman) and A.6770 (Weinstein) This legislation would expand the types of compensation available to family members in a wrongful death claim to include grief and emotional anguish. The current law permits families of a victim of wrongful death to collect the full value of any economic damages (for example medical costs, loss of support, loss of a future inheritance, etc.), damages for pain and suffering experienced by the victim, and punitive damages if the defendant's conduct was particularly malicious and/or intentional. We oppose this bill because it is unnecessary and costly. The current law provides juries the ability to fairly compensate the families of victims. Emotional damages by their very nature are subjective and impossible to quantify, and in tort cases where they are awarded, are often sizeable. Ultimately the cost of these awards are borne by policyholders and the public writ large, through higher premiums, loss of affordable coverage options, and higher taxes. A recent study found that this legislation could increase average annual premiums for New York residents and businesses by $2.2 billion or 12.6%.
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